Recently, our very own Lorenzo Sanchez, CFP® was profiled on the Investing Forward Podcast with Linda Rogers. Below is an edited interview of how Lorenzo and the team at Rowling & Associates are creating a unique investing, tax and financial planning firm, while aligning clients’ values with their investing and charitable goals.
Linda Rogers: Awesome, thanks so much for doing this, Lorenzo Sanchez from Rowling & Associates.
Lorenzo Sanchez: Thanks for having me, Linda. As for an introduction, I am a Certified Financial Planning professional and the Director of Wealth Management at Rowling & Associates.
For me, this means I oversee our financial planning team and lead our investment committee as well. I started at Rowling in 2013 as a financial planner and before that I worked as a credit analyst in Mexico at the Latin American headquarters of a Fortune 500 company. And before that I was studying my B.A. in finance at the University of Notre Dame.
Linda Rogers: Tell us a little bit about Rowling & Associates.
Lorenzo Sanchez: Rowling & Associates is a fee-only wealth management, financial planning and tax services firm, and we’re located in sunny San Diego, California. When I joined in 2013, our team was eight people, and we’ve now grown to 15. And that includes three CPAs and three Certified Financial Planning professionals like myself. Right now, we manage close to $500 million in assets and our main goal as a firm is for our clients to be able to live their lives without having to worry about their finances.
We’ve built a very diverse team, which we see as a huge advantage. If you look at our website, you’ll notice that our firm is very different from the rest of the industry. Our main page picture is an image of our team jumping on the beach. It’s not your typical sailing boat or a picture of a 60’ish year old couple sitting on the beach in retirement, smiling.
By diverse, I mean our team is 60 percent women and we have team members that are part of the LGBTQ community. Also, a few of us are from Europe, two of us are from Mexico, and we have an employee from India. Our age demographics for our employees range from mid-twenties to mid-seventies. Having a diverse team is really important for us because our firm uses what we call a team approach with our clients.
We think that R&A is one team. All of our members actively engage in our client’s success through cooperation and sharing ideas and information, most importantly, their opinions, which are all very different. And as a firm, we don’t have advisors with individual clients. All our clients are clients of the firm, and that allows them to benefit from all the firm’s resources.
Linda Rogers: Really? So, clients don’t have a primary advisor? That’s the first time I’ve heard of that.
Lorenzo Sanchez: Yes, we’ve embraced this philosophy and it has been our founder, Sheryl Rowling’s methodology for a long time. And now that we have people that have been at our firm for a while, one of the main benefits is that it seems less intimidating as a new employee. It was from day one we were in client meetings and leading meetings here and there and emailing directly back and forth with clients. So, it was a really good way to speed up the learning curve.
Linda Rogers: And when Lorenzo mentions Sheryl, he means the famous advisor Sheryl Rowling. She is the founder of Rowling & Associates and having also been in San Diego when I started my business, she’s been a role model to me. She was a woman that started a financial planning practice with tax preparation, and investment management. She’s a thought leader in the space. She writes for Morningstar.com. Just an incredible person and obviously, she’s built a great firm.
And who is your typical client?
Lorenzo Sanchez: I’ll preface this by saying that our firm has no minimums and we’re really happy to help anyone.
That said, because we do have an in-house tax team, the type of client that benefits most from our firm is someone that has both a complex financial and tax planning need. So, for example, a couple with a rental property, and one of them has a stock option plan and the other owns a business. This type of household really benefits from the synergies that occur between our financial planners and our CPAs.
Our clients really like how convenient it is to have their investment person and their tax person and their financial planning person under the same roof. That said, we do work with people that are starting their financial planning journey as well. And we have clients that are in their mid and late 20s right out of school, maybe starting their first job with their first 401k; and then we also have a lot of retirees that we’re helping with their withdrawal strategies.
Linda Rogers: Shifting gears, are you doing impact investing or ESG integration right now in your portfolios?
Lorenzo Sanchez: Yes. We are actively doing ESG integration right now for our client portfolios. For background, our firm uses 100% mutual funds to implement all of our investment strategies.
About four years ago, we started looking into mutual funds that were integrating ESG information into their investment process. We hold between 12 and 15 asset classes in all of our clients’ portfolios, and at that point we were able to find maybe three or four funds that we deemed appropriate for our clients.
So back then, all we did was say, hey, clients, this option exists now, and if it’s something that you’re interested in, we can make the switch over to these new funds and maybe five or so of them switched over. Over time, we were able to add more and more funds as ESG focus funds matured and crossed our minimum to have at least five years since inception.
We also did a lot of education for ourselves. We learned more and more about the ESG mutual fund universe and were able to find more and more options. So as of last year, we recommended all of our clients make the switch to our now complete ESG mutual fund buy list. Last year, we still had two mutual fund buy lists; an ESG one and a traditional one, which allowed clients who weren’t comfortable or just didn’t want to make the switch yet to stay as they were. We really didn’t have that many clients that didn’t want to change, and most of the ones that showed initial push back have now made the jump thanks to education like webinars and emails that we would send out on the topic and mostly their trust in our judgment and our process.
When we finish our investment review this year at the end of September, we’ll only have one mutual fund buy list, which will be 100% ESG focused.
Linda Rogers: I know your firm started out doing traditional investing. So please tell me about what you said four years ago when you started to look at ESG integration. What was that push?
Lorenzo Sanchez: Every year we go through a ‘start from scratch project’ where we say, let’s pretend like we don’t have investment allocations. Let’s pretend like we don’t have preferred funds. What is the best portfolio that we can put together for our clients?
A big part of the process is our investment committee getting together to brainstorm on new ideas. And this happens in an all-day meeting and it also happens throughout the year as we see things emanate from different mutual fund companies, from Morningstar and from other thought leaders. And we’ll say, let’s keep this on our radar and see once we get together, if it makes sense.
At the beginning, ESG interested us because our client base is very charitable and we thought this would align well with that philosophy. In other words, we thought that charity for our clients implied giving up some return for the “greater good.” But our pitch now is that ESG actually provides the same return over the long term, and actually reduces overall portfolio risk. Thus, this concept of same return, less risk is why we recommended that our clients be in all ESG funds.
Linda Rogers: Any final thoughts?
Lorenzo Sanchez: We really consider ourselves advocates in this space and for other financial professionals and advisors. We’ve done various presentations at conferences for Morningstar, our blog is pretty active on the Rowling side, and we do offer a separate service for advisors that would prefer to use our investment allocations rather than do the research in-house. We call that our InStrategy platform, and that includes our investment allocations, ESG fund recommendations, rebalancing settings, client communications and more.
It’s an outsourced, take it and use it right away approach, making it very convenient for advisors that want to spend more time prospecting or servicing their clients and less time doing investment research.
Linda Rogers: Ok, thanks for doing this, Lorenzo.
Lorenzo Sanchez: Thank you.